Apolipoprotein A1 (apo A1), the major protein of high-density lipoprotein, is secreted as a proprotein and then cleaved by an uncharacterized metalloproteinase. Here this enzyme is identified as C-terminal procollagen endoproteinase/bone morphogenetic protein-1 (BMP-1). Studies with recombinant BMP-1, BMP-1 antibody, and BMP-1 siRNA establish this proteinase as the major or only apo A1-converting activity secreted by human liver-derived (HepG2) cells and CHO cells stably expressing human apo A1. BMP-1 stimulates the conversion of newly secreted proapo A1 to its phospholipid- (PL-) binding form. In this way it promotes formation of functional HDL and reverse cholesterol transport, while inhibiting filtration and clearance of uncleaved proprotein. Alpha2-macroglobulin, a protease inhibitor secreted as part of the innate immune response, inhibits BMP-1 activity and blocks the maturation of proapo A1. The decrease in circulating apo A1 levels that is characteristic of the response to inflammation and infection may be mediated, at least in part, via BMP-1 by this novel mechanism.